Democracy, Market Economy, and Corruption

Corruption, defined as the abuse of public power for personal gain, occurs all too often in countries around the globe. While individuals’ greed can certainly contribute to the pervasiveness of this phenomenon, the key underlying cause of corruption rests in systemic, not moral, flaws. In many countries, existing laws and regulations contain incentives for corrupt behavior. Unless these incentives are changed, no meaningful anti-corruption reform can take root. Giorgi Areshidze, Director of the Partnership for Social Initiatives in Georgia, talks about corruption and its destructive impact on democracies and market economies in his CIPE Development Institute presentation (free registration required). He says that:

“ When we try to implement rule of law and the laws themselves are corrupt, then we are implementing corruption. Many times laws and regulations are written in such a manner that they are generating corruption.”

Ultimately, only liberal democracy can ensure that proper checks and balances exist to prevent corruption. But corruption is not just a political problem: it also has important economic dimensions. When corruption undermines property rights, enforcement of contracts, and the judiciary system, economic growth and development cannot be sustained.